"Disney Interactive Studios confirms the cancellation of the Pirates of the Caribbean: Armada of the Damned video game which was scheduled to be released in 2011," Angela Emery, Disney Interactive Studios' vice president of communication told Kotaku today. "As a result of this decision, Disney Interactive Studios completed a restructuring of Propaganda Games, its Vancouver, BC internal studio, affecting one of the studio's two development teams. The studio is still in active production of TRON: Evolution, the video game, which will be released on December 7, 2010 with additional DLC (downloadable content) support following the game's release."

We're told that Vancouver-based Propaganda Games, which is also working on Tron: Evolution, let as many as 100 people go this week, including most of the Pirates team and some of the Tron team. The remaining team members from Pirates were shifted over to help put finishing touches on Tron, we are told.

Emery declined to confirm the number of people impacted by layoffs, but did confirm that they've taken the studio from two teams to one.

This latest news seems to back up rumors we've been hearing since early September about turmoil at Propaganda Games surrounding disagreements with upper management at Propaganda and their parent company.

When we last saw Pirates of the Caribbean: Armada of the Damned we were impressed with it's Fable-like graphics, and the efforts the developers were going to to make the choices you made in the game impact the story, the gameplay and the look of your pirate and his ship.

Tron, on the other hand, still seemed to be struggling with bugs and development issues.